Another Pair of Merrill ‘Lifers’ in NYC Leave Over Retirement Account Changes

With the window closing on their ability to offer commission-based retirement accounts at Merrill Lynch, a growing number of firm veterans are jumping to rivals with more liberal policies.

The latest are Michael Lombardi and Andrew Katchen, who left Merrill’s home-office branch in downtown Manhattan on Wednesday for Morgan Stanley. They are the fourth and fifth senior producers to leave the 255 Liberty Street branch since December. Merrill announced in October that it would be prohibiting sales of mutual funds in retirement accounts and of any commission-based products in the accounts.

Though each is a solo practitioner, Lombardi spent his 23-year brokerage career at Merrill while Katchen worked for all of his 17 years in the industry as a member of the Thundering Herd. Each produces between $600,000 and $700,000 annually, said a person familiar with their practices.

Lombardi and Katchen did not respond to messages left at their new office in midtown Manhattan, but three people who know them said they were concerned about losing business due to the new policies on retirement accounts that Merrill is implementing to avoid liability associated with the Department of Labor’s pending fiduciary rule. Despite a likely delay in the rule’s implementation date, Merrill officials have said they expect most of their policy changes to remain.

Lombardi was particularly vulnerable to the ban on commission-based individual retirement accounts because he has a heavily transactional book of business, a former colleague said. He was also one of a rising tide of advisors chafing over new record-keeping requirements, including the firm’s push to have them update investment goals for all clients on Salesforce software.

“The compliance is suffocating here for guys like him,” the source said.

Lombardi and Katchen’s exits follow those of Ira M. Friedman and Andrew Sallis, a multi-million dollar production team who left the Merrill branch in late January, and of Liam O’Connell, who left in December. All joined the Morgan Stanley branch on Avenue of the Americas.

Another veteran Merrill Liberty Street team of six advisors and eight associates, led by Larry Rothenberg and Shawn Van Vliet, moved in late January to a New York office of San Francisco-based First Republic Bank.

“It’s the lifers who bled Merrill Lynch blue for years and years,” said Howard Diamond, a recruiter in Morristown, N.J. who was not involved in the moves. “It’s not their father’s Merrill Lynch anymore.”